"Economic Espionage" is a relatively new term to US businesses and the executives who run them. Counter-measures, using both public and corporate resources, are being developed through the sharing of ideas and experiences. Economic crime and corruption now drain an estimated $260 billion a year out of US based companies as well as $140 billion from overseas operations. Corporate leaders have a critical need to identify their company's vulnerability to economic espionage, as well as strategies for protecting the technology and information most at risk to this rising criminal epidemic.

It is now a given fact among intelligence professionals that virtually every traditional espionage technique used in time of war is being employed in today's business sector. Many non US companies and countries routinely insert agents into American firms, compromise key employees, or otherwise subvert company operations. The goal is to steal trade secrets, plans and confidential procedures. The protection of such "intellectual property" is fast becoming a key issue in international business activities.

How real is the economic espionage threat? According to the American Society for Industrial Security (ASIS), cases of economic espionage directed at American companies have grown 260 percent since 1985. The FBI industrial espionage caseload has jumped to 500 current investigations. The cost of economic espionage to corporate America is now estimated conservatively to be at least $50 billion a year.

According to Professor James Chandler, head of the Institute of Intellectual Property Law, if the full marketing ramifications of the intellectual property theft and unrestricted technology transfer are factored in, estimates rise to some $240 billion a year.

US corporations operate in a legal culture that respects the sanctity of private property ownership. This philosophy is not shared by every country in the world. In some cases, these adversaries include politically "friendly" nations. Countries that were and are military allies. American companies and those of other nations who share the United States open, innovative business and legal culture are ill prepared to combat the resources of foreign intelligence services.

Intellectual property law is recognized to be weak and provides little or no protection to US companies targeted by foreign agents. The US patent system is an open source of information. American patent laws have not been revised since the computer revolution. Currently, digital and biotechnology companies are believed to be at particular risk. A major security concern centers on the GATT treaty and efforts to lessen its provisions for intellectual property provisions. Local police, the Federal Bureau of Investigation and the Central Intelligence Agency are severely limited under the law in their ability to help corporations combat economic espionage. They also face vastly expanded missions. Street crime, international money laundering, narcotrafficking, and terrorism are stretching resources already thin. The security previously provided by a large US military presence abroad has all but evaporated.

Traditional protection options are just not working as deterrent to economic espionage. Corporate security systems often fail because they are set up essentially to protect people and physical assets not the ephemeral information flooding the world's new electronic highways. Trusting that conventional resources will protect a company's trade secrets and operations from foreign espionage is out of date. According to emerging legal thinking, it may actually border on managerial and fiscal irresponsibility.

A counterintelligence expert recently put it this way, "The problem is that American companies are naive about what is going on. Americans have such an entrepreneurial spirit that many see this kind of activity as being good for competition and technology". An alarming number of companies seem to have resigned themselves to the loss of their trade secrets. The treasurer of a research company who is producing leading edge technology for the wireless communications industry voiced this strategy for combating economic espionage: "We assume there is `migration' of our ideas to other countries. But, our R&D engine is just warming up. We will produce more ideas." This "Take the loss and move on" approach is becoming increasingly unacceptable to shareholders, financial institutions, and insurance companies who must bear the losses.

There is no one, easy solution to countering economic espionage, However, there are ways to approach the problem and they focus on top management involvement. Few corporate leaders today have military experience. Nor have they had much contact with intelligence services. In fact, there is a tendency to keep government of any description at a distance in many cases with very good reason. Yet understanding the intelligence function and its role in modern economic warfare is absolutely essential to corporate survival.

Countering economic espionage will increasingly demand that corporate leaders arm themselves with a working knowledge of intelligence and counterintelligence. Then, they must equip their companies with business intelligence and counterintelligence systems. The first step is to realize that a business counterintelligence system is quite different from a conventional security program. The emphasis in intelligence is on information, the collection, analysis and uses of information, and on countering the theft of company information through subversion and other forms of espionage.

It is estimated that fewer than 5 percent of major US companies have a business intelligence system in place. In contrast, estimates by those with long CIA experience in Asia, are that 100 percent of Japanese companies have such a system.

Economic espionage is the front line of a new world economic war. It is a war that most companies from open, democratic nations are ill prepared to fight. There is an old business adage that says, "Surprises end a career". Corporate leaders need to get up to speed, fast, on the gray people and gray areas of economic espionage. Because, we know that far flung competitors already are.

Copyright 1995 Perry Corporation, Inc. REPRINTED WITH PERMISSION OF PERRY CORPORATION